Abstract:
In the past, “non-practicing entities” (NPEs), popularly known as
“patent trolls,” have helped small inventors profit from their
inventions. Is this true today or, given the unprecedented levels of NPE
litigation, do NPEs reduce innovation incentives? Using a survey of
defendants and a database of litigation, this paper estimates the direct
costs to defendants arising from NPE patent assertions. We estimate
that firms accrued $29 billion of direct costs in 2011. Moreover,
although large firms accrued over half of direct costs, most of the
defendants were small or medium-sized firms, indicating that NPEs are
not just a problem for large firms.

-- A total of 2,150 companies had to defend themselves 5,842 times
against patent suits in 2011 alone--an amount of litigation that
represents "a wholly unprecedented scale and scope."
-- Those claims accounted for $29 billion in direct costs--outside legal
fees, damages, and settlement amount. And, oh yeah, it doesn't include
indirect costs, like the time and resources it takes a company to defend
itself and the price of product delays and market share losses.
-- The amount represents a nearly 10% hunk of the $250 billion devoted
by all U.S. business to R&D.
Much of the burden has fallen disproportionally on small businesses: The
defendants in that universe had median revenue of just $10.8 million.

"If
nature has made any one thing less susceptible than all others of exclusive
property, it is the action of the thinking power called an idea, which
an individual may exclusively possess as long as he keeps it to himself;
but the moment it is divulged, it forces itself into the possession of
every one, and the receiver cannot dispossess himself of it. Its peculiar
character, too, is that no one possesses the less, because every other
possesses the whole of it. He who receives an idea from me, receives instruction
himself without lessening mine; as he who lights his taper at mine, receives
light without darkening me. That ideas should freely spread from one to
another over the globe, for the moral and mutual instruction of man, and
improvement of his condition, seems to have been peculiarly and benevolently
designed by nature, when she made them, like fire, expansible over all
space, without lessening their density in any point, and like the air in
which we breathe, move, and have our physical being, incapable of confinement
or exclusive appropriation. Inventions then cannot, in nature, be a subject
of property."

Jefferson himself reluctantly went against his better judgement in helping to establish the patent system in the United States in the hope that the public interest would benefit on balance. He should have stuck to his natural law convictions as nature once again proves itself superior to human efforts to defeat it.